Physical stock shortage disputes may fail where no contemporaneous objection is raised to the panchnama findings.

Demand and penalty arising from shortage found during physical stock verification were sustained because the shortage was recorded in the panchnama in the presence of the appellant's employee, who accepted it. No contemporaneous objection was raised to the mode of measurement or to any need for shrinkage adjustment, and no immediate retraction followed. The later defence taken in reply to the show-cause notice was treated as an afterthought. The findings of the lower authorities were found and no infirmity was identified in their appreciation of the evidence.

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Issues: Whether the demand and penalty based on shortage found during physical stock verification were sustainable when no objection to the mode of measurement or shortage was raised at the time of panchnama.

Analysis: The shortage was discovered during physical verification and recorded in the panchnama in the presence of the appellant's employee, who accepted the shortage. No immediate retraction or contemporaneous objection was made regarding the method of measurement or the alleged need for shrinkage adjustment. The defence raised later in the reply to the show-cause notice was treated as an afterthought. The lower authorities had examined the matter properly and no infirmity was found in their findings.

Conclusion: The demand and penalty were upheld and the appeal was dismissed.

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